Comp In Management 2013 Ch 1-4
Information asymetry
A decision situation where one party has more or better information than its counterparty
cash convergence cycle
A retailer sells stuff • Amazon mostly has items which are potential to other retailors as well Amazon needs to get stuff from suppliers and collect from customers Cash conversion cycle: period between distributing funds and collecting cash for a given operation • Amazon has a NEGATIVE CCC because it collects cash from customers BEFORE distributing funds to its suppliers o BestBuy: average number is 70 days from receiving item to having it purchased and collecting from consumers Need to pay suppliers in 50ish days o Amazon Higher inventory turns Items go to warehouses and not to stores after Amazon has scale which gives it more bargaining power than suppliers • Bigger you are, more reliable partner, negotiate with what buying o Can get longer time for amount payable
silicon wafer
A thin, circular slice of material used to create semiconductor devices Hundreds of chips may be etched out in a single wafer, where they are eventually cut out for individual packaging
internet of things
A vision where low-cost sensors, processors and communication are embedded into a wide array of products and our environment, allowing a vast network to collect data, analyze input and automatically coordinate collective action Smart house, clothes communicating with washer machine
Imitation-resistant value chain
A way of doing business that competitors struggle to replicate and that frequently involves technology in a key enabling role
Scale advantages
Advantages related to size
Network effects
Aka Metcalfe's Law or network externalities When the value of a product or service increases as its number of users expands • Facebook valuable because of number of users • Microsoft Windows holds 90% share
Affiliates
Aka associates Third parties that promote a product or service, typically in exchange for a cut of any sales
Netflix/Amazon Distribution Channels
Amazon got Kindle to put books into hands of customer Netflix created distribution channel through firms with complementary products such as xBox/PS3/Nintendo etc. to make product and Netflix more valuable
Long-tail
An extremely large selection of content or products Phenomenon whereby firms can make money by offering a near limitless selection Businesses that can profitably offer a great volume of les popular products Examples • 60% of Amazon's products aren't offered at Barnes and Nobles store • Rhapsody makes 50% of revenue on songs that aren't in the top 10,000 • Netflix found customers who weren't being served o Netflix had unlimited shelf space due to warehouse, online design
IS
An integrated solution that combines 5 components: hardware, software, data, procedures and the people who interact with and are impacted by the system o Hardware and software! - information technology o Data, people and procedures
bits
Are one or zero
quantum computing
Bits could be one, zero or both
Cloud benefits
Bring computing power world wide • Pump water to create wifi in places even without plumbing Scaleable • Need more capacity, just buy more Huge savings • Support, maintenance, hardware, upgrading, networking and much of security handled by someone else
How to lower prices without scale
Buy direct • Save by eliminating middleman o No middleman/wholesale cut Give suppliers what they want to get price cut • Unlimited "shelf space" o Win-win negotiation with better price but buying more o 7 firms in US control 90% of shelf-space Freshdirect says good prices and you can put whatever you'd like on our website instead of spending on shelf space • Pay suppliers faster o Request better price in exchange • Co-branding o Differentiated by image of good quality o Get price break in exchange for expanding business • Share the data o Stores have you swipe card to know what bought, but don't know what you looked at o Intelligence on what customers are interested in can be really useful o Data rather than guessing products is significant
Quality score factors
CTR • Click Through Rate Key words • Breaks up each word and words together Ad text relevance • Don't link with words than have different things on site User experience of landing page • Don't send people to sites they won't like
CISCO Flip Video Buy Failure
Cisco bought Flip Video camera Maker for $590 million • Investment was not imperfectly imitable, rare, non-substitutable or valuable • Cisco laid off 550 employees after they realized they did not have the four characteristics
Characteristics of Disruptive Technology
Come to market with set of performance attributes not initially valued by existing customers • 8 pount toaster sized Kodak digital camera • Huge car telephone o Don't need to be better than incumbent, just good enough to take away customers o Develop scale economies
Collaborative filtering software
Data leveraging to make product recommendations and assist in music discovery
Esoko
Delivers farm prices, tips and other information in texts 10 percent revenue gain for farmers Mobile phone as bank becoming popular as well
Three-fold consumer advantage
Distribution centers, selection and customers
Operations
Do certain products sell more during holidays Make slow-moving item available but don't put it in all the warehouses
byte
Eight bits kilobyte refers to roughly a thousand bytes, or a thousand characters, megabyte = 1 million, gigabyte = 1 billion, terabyte = 1 trillion, petabyte = 1 quadrillion, and exabyte= 1 quintillion bytes.
solid state
Electronics without moving parts (e.g. chips)
Netflix fights back
Exclusives • Madmen licensing Long enough tail • Seeking moments of truth from customers • Turn on Netflix instead of DVD • Customer experience supposed to be exceptional Scale • More customers • More content Original content • Critically acclaimed, culturally resonant content Data's "BIG" role • Collaborative filtering • Know what's popular than DVDs going out • Pay 48 million dollars to revive Arrested Development when saw interest in it rising Ted Sandros, Netflix content chief • "I can justify the spend with our data and do so with a far greater degree of confidence than the television networks... The goal is to become HBO faster than HBO can become us" Mass customization • Target promos via pages and custom-targeted ads • 7 ads for one series • Strong women if people love women Creative • Casting decisions for Orange is the New Black
Amazon warehouses
HUGE Hired two executives from Walmart but very different • Over 2 million packages per day Unconventional • Similar items never next to each other on shelf o Make sure things aren't similar at all Doesn't want to mix up items o Software tells where to stack incoming stuff • Scattered out makes it crazy for pickers know where to go o Told by the system where to go by handheld scanner Fewer steps
Patent trolls
Hold intellectual property not with the goals of bringing about novel inventions to market but instead in hopes that they can sue or extort large settlements from others
Platitude: Internet shifts bargaining power to consumers
If commodity then yes • E.g. Blue Nile diamonds • Superior cost economics online too • Buyers' bargaining power increases because of price transparency o Increased price transparency o Lower information asymmetry Know more details now If differentiated good then not the case • Extremely rare, high demand item • Internet allows appeal to reach more potential buyers, price goes up • World can bid online
GAP vs. Zara
GAP Zara Manufacturing (mfg) Contract manufacturing Spain Lead time 6 months vs 2 weeks Items/year 2000-4000 vs 30,000 Awareness Advertising vs Customer Experience Designs based on Guess (purple leather pants!) vs data Cust.visits/year 3 vs 17 Marketing spend 3.5% vs .3%
Operational effectiveness
Performing the same tasks better than rival firms perform them
PDAs
Personal Digital Assistants • Handheld computing devices meant largely for mobile use outside an office setting o Personal digital assistant (cellphone without the phone) o Used by managers and sales staff o Asking customers what they'd like to see on shelves
La Coruna
The Cube • Hires fresh from fashion design school so team members are team players and share in successes and can crank out numbers after receiving information on customer desires
dynamic search ads
o Ads generated automatically based on the content of a Web site o Dynamic ads are particular useful for firms with rapidly updating inventory or firms struggling to keep up with new search terms that may be relevant to their product line
interstitials
o Ads that run before a user arrives at a website's contents
ways to lower prices
o Advertise less o Introduce own private labeled products
keyboard advertising
o Advertisements that are targeted based on a user's query
contextual advertising
o Advertising based on a Web site's content
PageRank
o Algorithm developed by Google co-founder Larry Page to rank websites
Marketplace
o Allows amazon to take advantage of long-tail without responsibilities of products that won't sell being in its inventory o Option for sellers to ship selves or use Amazon guarantee o Credit card info on Amazon? Potential switching cost o Amazon still collects fee o Amazon still gains customer experience value o Amazon doesn't hesitate to kickout sellers with bad ratings
Contract manufacturing
o Allows cheaper manufacturing in developing countries but then child labor, ignorance of laws occurs because of price-cutting E.g. Rana Plaza where 1100 in Bangladesh were killed due to improper building structure in Spring 2013 • Walmart, The Children's Place, Benetton bought supplies from there o Managers need to consider suppliers and partner's ethical decisions too
link fraud
o Also called "spamdexing" or "link farming" o The process of creating a series of bogus Web sites, all linking back to the page one is trying to promote
remarketing
o Also called retargeting o Lets a web site show custom, targeted ads to a user when visiting other sites if that user has already visited a given page on advertiser's site o This technique allows firms to "reintroduce" products to users or target them with special messages or promotions
retargeting
o Also known as remarketing o A form of online targeted advertising where ads are personalized for consumers based on previous internet activity that did not result in a sale or conversion o Surf the web and see ads for products you've looked at on other sites? Likely a result of retargeting
models of streaming
o Amazon Gives away streaming library for free with Prime subscription • $79/year for free 2 day shipping o Hastings Just wants to keep it as simple as possible with customers o Hulu Free/ad supported subscriptions and monthly subscriptions o Itunes From rental tv shows to need to buy them • Suppliers wouldn't let them rent dvd shows, now buy o Walmart Bought vudu • First company to stream avatar
A/B Testing
o Amazon leverages A and B testing Randomized group of experiments used to collect data and compare performance among two options studied • Font color, placement, size, color o Find customer responds Would take long time for walmart to find where in store sells best
search inside book
o Amazon scanned PDFs and allowed search Book sales went up 7-8% Paul Springer introduced it to Asia (VP at Rhapsody) Holding kindle • Moore's law idle o Amazon selling more kindles than actual books now
Negative cash convergence cycle
o Amazon sells and collects BEFORE paying suppliers o Cash generating machine o Amazon is in cash flow position that no one can match
AMazon's private brands
o AmazonBasics Quality products at great prices From backpack to cords o Pinzon Bed sheets I think o most parties have 3rd party make products suppliers • give amazon access to some items but not others o Amazon will threat to enter market on own o No middlemen, pressure to suppliers to grant best price, payment terms and complete product line access
Ad network
o An effort that links advertisers to Web sites and other content providers (e.g. app firms, games) that are willing to host advertisements, typically in exchange for payment
Network Effect Market Characteristics
o Early competition Due to concern about staying power • Market tips towards whoever looks like will be winner as soon as it sees winner being formed • Once Walmart went BlueRay, Netflix followed then studio did o Didn't make sense for Toshiba to stick with HDDTV that they came out with Natural state for products/services is winner take all/winner take most • One dominant firm because used since everyone else does o Bandwagons o Monopolistic tendencies
AWS powered businesses
o Etsy, Airbnb, Pinterest, Yelp, Zynga, Instagram, Netflix, Dropbox o Also used by NASA, Eli Lilly, the New York Times Corporation and ESPN for key tasks o Advantages include scaling up /down as needed and not overpaying people, hardware or software o Target left AWS and powered own website but unexpected popular promotion crashed the new website three weeks later
creating the killer app
o Existing customers and markets pressure No one wants it o Financial performance measures Small market and small margins
identifying technologies
o External conversations (VCs, academics, technologists) Mead in CA makes best chips o Internal conversations (engineering, marketing, planning) Don't let employees leave firm
disruptive technology/innovation
o Fast/cheap technological advancement and new and emerging technologies
Moore's law
o Faster and cheaper technology/computing o Chip performance per dollar doubles every 18 months
Marissa Meyer
o First female coder hired at Google, now in charge of Yahoo turnaround (up 75%)
multi-core
o Many chips in o Many processor 'cores' on a singled chip Two 160 lb guys doing same job as one 320, without heating up as much o Used in video games Toughest thing to do is take regular computer program and make it multi-core • One of toughest computer science things to do
multi-processor
o Many chips in one device o Watson Beat Jeoparxy o IBM wants to beat medical journals/doctors Don't want to exclusively lose
Kindle
o Many refer to it as e-Reader o About putting store in hands of a firm's over 150 million customers o Arrives hooked up to Amazon account with credit/debit card on it Preconfigured cash register and vacuum o Originally offered at $399, now only $69 due to Moore's Law o Built on modified Google's Android OS, allowing it to run a subset of native Android apps o Kindle was Amazon's top product in volume and dollar sales by its second year Also prompting more sales through it!
Amazon affiliate program
o Marketing practice where a firm rewards partners (affiliates) who bring in new business, often with a percentage of any resulting sales o Amazon gives Web site operators a percentage of their sales generated from these promotions o Amazon Associates program is the world's largest affiliate marketing program
accounts payable
o Money owed for products or services purchased on credit
Cost/performance evolution
o Moore's Law (doubles 18 months - # of transistors) o Data storage: doubles 12 months (bits per square inch)
Trade publishing
o Most of the books you'd find in a typical bookstore but not books such as educational, scientific or medical texts Amazon has gotten into publishing business Amazon offers 35 to 70% royalty options, compared to 20% for authors who give 50% to publisher and 30% to bookstore • Would print books if bookstore wanted • 16 of 100 top selling were exclusive to Amazon store
S3
o Rent industrial-strength computing capacity on an as-needed basis o EC2 (Elastic Computing Cloud) Provides the equivalent of physical computing hardware o S3 (Simple Storage Service) Provides Web-based storage o Dozens of other service offerings
bankruptcy
o Reorganize self with respect to creditors o Legal order to that o Sometimes company shuts down, but happens when can't pay off debt so they will
cloud computing
o Replacing computing resources- either an organization's or an individual's hardware or software, with services provided over the internet
search engine marketing
o SEM o The practice of designing, running and optimizing search engine ad campaigns
software as a service
o SaaS o A form of cloud computing where a firm subscribes to a third party software that receives a service that is delivered online
SEO
o Search engine optimization o The process of improving a page's organic search results
organic or natural search
o Search engine results returned and ranked according to relevance
solid state electronics
o Semiconductor based devices, o Components often suffer fewer failures and require less energy than mechanical counterparts because they have no moving parts o RAM, flash memory and microprocessors are solid state devices o Hard drives are not
ambient devices
o Sends out sports scores o Can link to sports team or stocks or medicine (pollen count) o Umbrella will listen for weather report within area, if going to rain within 8 hours then flashes and says will require my services
cloud computing
o Services over the internet instead of computing resources If Chipotle ran on a cloud provider then could have had services scale up to meet customer demand Rent or pay per use rather than buy o Benefits World class infrastructure for anyone Scaleable Huge savings: support, maintenance, etc
Behind Moore's Law
o Shrink things Decrease the space electrons travel o With 65 nm cells, (now 14 nm), can place tens of thousands in single blood cell
Triple threat to Moore's Law
o Size Primary reason Cant shrink forever Molecules get close o Heat Electrons close together get very hot o Power Costly to keep your cool
Steve Jobs - Gretzky
o Skate to where the puck is going to be by following curves See curves and ride wave, but miss them and sink
spiders, web crawlers, software robots
o Software that traverses available Web links in an attempt to perform a given task o Search engines use spiders to discover documents for indexing and retrieval
third party cookies
o Sometimes called "tracking cookies" o Served by ad networks or other customer profiling firms o Tracking cookies are used to identify users and record behaviors across multiple websites
Amancio Ortega
o Spain's wealthiest man o Founder of Inditex which supports 8 brands, including Zarra Inditex is the world's largest fashion retailer since 2008
Dr. Gogo
o Sproxil Medicines are lucrative with high margins • Work with phones to have free texting • Type in # and receive text back that says Fail or Ok o Stops counterfeiting o Saving lives worldwide • Scratch, text confi
90% of Amazon's services over email not phone
o Still every employee from Bezos down spends 2 days every 2 years o Empty chair at meetings to represent customer o Customer satisfaction is one of Amazon's Three Pillars
grid computing
o Take existing devices, add software to them and allow them to work as one computer Changing supercomputing
Novarus
o Temp sensor, wifi sensor, o Notices patterns of people and changes temp in house depending on when person comes home/what room they'd be in
Zarra
o The most innovating and devastating retailer in the world o Opening a store a day, expanding into 84 countries o High fashion but comparatively inexpensive!
Inventory turns
o The number of times inventory is sold or used during a given period o Higher number is better, selling more quickly
inventory turns
o The number of times inventory is stored or used during a specific period (such as a year or quarter) o A higher figure means the firm is selling products more closely
price elasticity
o The rate at which the demand for a product or service fluctuates with price change o Goods and services that are highly price elastic (e.g. most consumer electronics) see demand spike as prices drop, whereas goods and services that are less price elastic are less responsive to price change (think heart surgery)
Value chain
o The set of activities through which a product or service is created and delivered to its customers Set of interrelated activities that bring a product or service to market Inbound Logistics to Operations to Outbound Logistics to Marketing & Sales to Service • All these parts can be improved by technology
landing page
o The web page displayed when a user clicks on an advertisement
Internet ads > Other ads
o This Year > than all but television o Digital advertising crushes yellow pages, magazines, radio, newspapers Americans grew up w/TV but now consumption moving towards tablets 1. Increased user time online 2. Measurement and accountability • Pay simply for ads clicked on or actually seen 3. Targeting • Google has good idea of age, gender, what you like
Cookies
o Time o Frequency o Duration o Site Visited DoubleClick gives doubleclick cookie to user • Google pays attention to where she goes around web and builds a profile for her • IBM displays specific ads to different schools o How most websites remember you Remember my LogIn
Resource based view of competitive advantage
o Valuable o Rare o Imperfectly imitable (tough to imitate) o Nonsubstitutable
GlowCap
o Vitality 290 billion dollar per year from health care noncompliance o Cap pays attention if open up bottle to take meds o Medicine compliance Only 50% Flashes if not taking meds, then sings song, then texts you/loved ones, then sends one to doctor if want 98% compliance • 48% increase
Colocation facility
o Warehouse-sized facilities where telecommunication firms and other corporations bring their fiber optic cables and networking equipment together so that they can exchange networking traffic o These are the interconnection points that help make the Internet function as a network of networks
Amazon founded by Bezos
o Went three years w/out a profit, losing $3 billion o Postponed profit harvesting to expand warehousing capacity, build e-commerce operations world wide, growing one of the internet's most widely used cloud computing platforms, leading the pack in e-readers and developing the first credible threat to Apple's dominant iPads in tablets o Amazon's net-income climbed from $476 million to 1.16 billion o By lengthening the timeline, you can engage in endeavors that you could never otherwise pursue Invested in Blue Horizon, 10000 year time clock inside a mountain o Mobile computing as vehicle for media consumption, distribution channel for increased sales and advertising, a creator of switching costs, a gathering point for powerful data, and in competition for platform dominance
channel conflict
o When a firm's potential partners see it as a rival o This threat could come because it offers competing products or services via alternative channels or because the firm works closely with especially threatening customers o Winner is firm that offers more value Walmart/Target stopped selling Kindle Barnes and Nobles won't sell Amazon's books
Vertical Integration
o When a single firm owns several layers in its value chain Nearly 60% of Zara's merchandise is made in-house! Not from outside suppliers! Zarazoga/La Coruna are 5 million foot distribution centers No item stays in house over 72 hours
agency pricing
o Where the publisher sets a price and the reseller gets a cut (usually around 30%) o Not legal, but rivals colluding to set prices is
o Will do whole chapter on it o Zuckerburg turned down offers for billion dollars, went public and has 17 bill
eWaste
o electronic waste o the effluent of the affluent o 2.5 million tons in American waste alone, but has gotten worse • More precious metal per pound in computer than what is mined at gold/silver mined o 50-80% of machines for eWaste in US are shipped overseas Part of recycling was pouring acid over motherboard to dissolve all but precious metals • Poison got in ground water Firms that thought were doing thing had engaged with partners who weren't doing good ISO - International Standard Organizations Silicon Valley Toxins Coalition
One King's Lane
o iPad app o are people really going to buy couches over devices? Yes, 25% o Saves on creating flyers and growing like a rocket Serial entrepreneur BC alumnus runs it
microprocessors
• Calculating brain of a computer • Intel dominates this market in PCs, ARM (licensed) dominates smart phones o ARM is intellectual property o Apple A7 chip has ARM logic in it o British company that dominates smart phone business o ARM is good at LOW POWER o The part of the computer that executes the instructions of a computer program o The brain of a computing device
RFID chip
• Can now broadcast location out • Exists in MBTA cards which is why can tap card on bus • Chips used to catch a lot of money, but now are very inexpensive o Reader is expensive
windowing
• Content available to given distribution channel over certain time period under licensing model o Content is available to a given distribution channel for a specified period of time (window)
Marginal costs
• Costs associated with each additional unit produced • Marginal costs of digital products is effectively zero often
Fixed costs
• Costs that do not vary according to the production volume
cord cutters
• Cutting out cable company completely
Critical but not enough to survive
• Design • Customer service • Technology • Quality
cord shavers
• Dropping premium channels, why pay extra money for Starz/HBO when can get it on Netflix
Early lead with market-serving product
• Early lead with market-serving product creates a big share, customer lock-in, internal learning, and a network effect derived from complementary offerings ranging from the employment base provided by a growing number of AWS-skilled developers to a rich assortment of software capable of using the platform
Fast follower problem
• Exists when savvy rivals watch a pioneer's efforts, learn from their successes and missteps, then enter the market quickly with a considerable comparable or superior product at a lower cost before the first mover can dominate • 500 tried to copy Groupon • Flip camera barely lasted 2 years because phones adapted it
buying words for ads on Google
• Honda bought keyword "Toyota Prius" and put "Honda Insight Hybrid" ad on their website o Courts judged free speech o Tactic that can be used or used against you
cooperation/frenemies
• Being both partners and competitors with a company
Sources of switching costs
Learning costs • Switching technologies may require an investment in learning a new interface and commands Information and data • Users may have to reenter data, convert files or databases, or may 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 • Think frequent purchaser programs that offer "miles" or "points" (all enabled and driven by software) Data • Cost of information feeds, recommendations and time savings provided by firms that already know customer well
Viral marketing
Leveraging consumers to promote a product or service
Supply chain management (SCM)
Linking inbound and outbound logistics with operations
Qwikster fail
Lost 12 billion in market value and 800,000 customers in 90 days "Companies rarely die from moving too fast and frequently die from moving too slowly" in terms of switching to more favorable technology • Hastings admitted "we moved too fast for our customers"
Multi-processor
Many chips in one device Basically parallel supercomputers Delivering massively-parallel supercomputing • Supercomputers used to be governments o Did nuclear explosion runs Now US shares for cash w/ IBM (Watson) and Procter & Gamble • Watson commercialized in medical arena • Compose answers for you that you can verify with human brain o DeepBlue before Watson beat Sparhoff in chess o Business problems is similar to looking at chess moves and figuring out best one Old comps would look at 3000 flight combos, DeepBlue looked at 350,000 for Delta Airline o Really expensive for supercomputer tho
Multi-core processor
Many processor cores on a single chip • Slower but still more
multicore multiprocessors
Microprocessors with two or more (typically lower power) calculating processor cores on the same piece of silicon Two 160 lb guys with less effort than one 300 lb lineman
Timing and Technology
Moving first pays off when time lead creates critical resources that are valuable, rare, tough to imitate, and lack substitutes Build resources like brand, scale, network effects, switching costs, or other key assets to give your firm a shot It's what a firm DOES with its time and technology lead
Grid and cluster computing
Multiple devices working in tandem as one computer Grid computing software • Make them behave sometimes as if supercomputer • Works great for problems that can be divided up o Does not work for linear problems Monsanto • Uses grid computing for genetics (bio infogenetics major at BC)
netflix infrastructure issues
Netflix consumes more bandwidth (downstream over internet) than anyone else • Bandwidth caps o Last mile firms (e.g. cable) threatens crackdown on bit guzzlers o Debate in court over it o In Canada they exist, so Netflix streams lower quality Public cloud infrastructure • Netflix runs on Amazon's cloud o Freenemies or coopetition Friends and rivals • Infrastructure is not the advantage that data is Global expansion • Scale o Bigger than all • No warehouses o Us postal service is awesome from consumer standpoint o More expensive and not as secure for mail outside US
GLUT
Over-capacity Value of project goes down because too much and everyone doing it
Strategic positioning
Performing different tasks than your rivals, or performing the same tasks in a different way
Operational effectiveness
Performing the same tasks better than your rivals • Same makes you a commodity
Privacy rights
Possible for Amazon to know politics, religion, health issue through patterns of products • Leveraging this data can be good for or scare a consumer o Just because you can doesn't mean you should o Need focus groups • Order associated with number goes into packaging and a robot prints out information to ship it to consumers o Protected from human beings picking up on where things going/to who
Commodities
Products or services that are nearly identical offered from multiple vendors o Many firms leverage technology to differentiate their goods or services Amazon customizes home pages to items for customers Capital One pursued customers others thought too risky
negative keywords
Putting in keywords so ad won't appear if negative key word is on page
RFID tags
Radio Frequency Distribution Tags Small chip-based tags that wirelessly emit a unique identifying code for the item that they are attached to
AdWords based on 2 things
Rank based on two things • Maximum CPC (cost per click) • Quality Score o Want ads that people will click on AdRank: Maximizing CPC vs. Quality Score SEM: Search Engine Marketing
disintermediation
Removing an organization from a firm's distribution channel Collapses the path between supplier and customer
Disintermediation
Removing an organization from the distribution channel Books: • Author to publisher to bookstore to shell @ tore to customer • Amazon offers 35-70% instead of 16% for authors • 16 of Amazon's top 100 books sold are exclusive to it
ROI
Return on investment Amount earned from an expenditure of any type of effort
Winning customers from established incumbent
Rival must provide value of service that exceeds incumbent's value of service and switching costs
Bezos
Selection, low price and customer experience (convenience) o Almost never gets asked what's NOT going to change in next 10 years but can build things based off things that are stable Like low prices, faster delivery and vast selection
chip plants
Semiconductor facilities Fabs Multimillion dollar plants used to manufacture semiconductors
Value chain
Set of interrelated activities through which a product or service is created and delivered to customers Five components • Inbound logistics o Getting needed materials and other inputs into the firm from suppliers • Operations o Turning inputs into products or services • Outbound logistics o Delivering products or services to consumers distribution centers, retailers or other partners • Marketing and sales o Customer engagement, pricing, promotion and transaction • Support o Service, maintenance and customer support Secondary components • Firm infrastructure o Functions that support the whole firm, including general management, planning, IS and finance • Human resource management o Recruiting, hiring, training and development • Technology/research and development o New product and process design • Procurement o Sourcing and purchasing functions
optical computing
Signals are sent via light than electricity
Enterprise Resource Planning Software
Software implemented in modules to automate the entire value chain
Customer Relationship Management (CRM)
Supporting sales, marketing and in some cases R&D
collaborative filtering
Technology that monitors trends among customers and uses this to personalize a given customer's experience Click 1-5 stars to rate movies • Average customer rates 200 movies Really powerful in persuading consumers to consume certain types of technology Essentially also becomes a switching cost
bandwidth
Telecommunication capacity Bps • Bits per second
transistor
The basic component of chips Super tiny on/off switches in a chip that work collaboratively to calculate or store things in memory
Switching costs
The cost a consumer incurs when moving from one product to another It can involve actual money spent (e.g. buying a new product) as well as investments in time, any data loss and so forth
Price transparency
The degree to which complete information is available
float
The gap between customer payment and time to pay suppliers
Atoms to bits
The idea that many media products are sold in containers (physical products, or atoms) for bits (the ones and zeros that make up a video file, song, or layout of a book) As the internet offers fast wireless delivery to TVs, music players, book readers, and other devices, the "atoms" of the container aren't necessary Physical inventory is eliminated, offering great cost savings • E.g. buying songs on apple, Amazon's kindle
Operations
The organizational activities required to produce goods/services Zara's operations are limited to northern Spain, so things like political unrest would cause serious problems whereas global companies have more safety from local politics, natural disasters, etc. Zara is also susceptible to Spanish economy • Quick transportation system to gas especially • Solution is higher prices in places like US
Distribution channels
The path through which products or services get to customers
Churn
The rate at which customers leave a product or service Usually expected that churn rate will go up when new competitor with lower prices joins office • Shows value in collaborative filtering
Brand
The symbolic embodiment of all the information connected with a product or service
To Go Private
To go private, take a firm private Buying up a publicly traded firm's shares
WWW
View what you want, when you want it, on whatever screen available • Bingewatching
Straddling
When a firm adopts more than one method of doing business (occupies more than one position) yet fails to gain the full advantages of any of these efforts
Economies of scale
When costs can be spread across increasing units of production or in serving multiple customers Businesses that have favorable economies of scale (like many internet firms) are sometimes referred to as being highly scalable
Congestion Effects
When increasing numbers of users lower the value of a product or service (usually due to over-consumption of a finite resource) Twitter would put up Fail Whale when overcapacity • Can't use twitter because too many people Customers were angered as iPhones overloaded AT&T • Like when at BC football game and everyone using one tower so 5 bars on phone is not really 5 bars Chipotle • Couldn't expand capacity to deal w/congestion effects SimCity • Couldn't even log in, not enough resources to deal w/people Facebook • Unfriending people because don't want in newsfeed
only the paranoid survive
Who's gonna kill us, where's tech headed
localization specialists
Work on making sure each of the available interfaces is customized to the appropriate language for each of the over 45 countries where Netflix is located
Personalization
p13n Show consumers what you think they'll like and will respond to Customers who bought this now buy this
7 Rules for Aspiring Entrepreneur
Advice is Free Find a Good Team Ideas Don't Fall Out of the Sky If we build it, they will come... right? - ask customers if value to idea Get some Help Stuff happens Be in it for the Long Haul
Sarbanes-Oxley Act
Also known as Sarbox or SOX; U.S. legislation enacted in the wake of the accounting scandals of the early 2000s. The act raises executive and board responsibility and ties criminal penalties to certain accounting and financial violations. Although often criticized, SOX is also seen as raising stakes for mismanagement and misdeeds related to a firm's accounting practices.
Netflix advantages
Brand, scale(distrbution center, customers and selection) and data/switching costs
How are strong, durable brands built?
Customer experience
Inventory = ?
Death, especially in fashion o Tough to predict styles months ahead of season o It took us thirty years to get to 1 billion in profits and 2 years to get to nothing - after GAP guessed wrong on future style
DWDM
Dense wave division multiplexing • Technology that increases the transmission capacity (and hence speed) of fiber-optic cable
AdSense
Google's Ad Network
IT
Information Technology Only hardware and software
Why could Netflix start price war w/Blockbuster
More customers
Is brand built through advertising?
NO! sometimes awareness is, but brand is built through customer service
How Amazon's expanding
building businesses and buying companies
Intel's Rival
o ARM which gives smartphone companies chips to tweak, based its chips off power-efficiency whereas Intel's chips were made to be plugged in o AMD has chips based on ARM logic
impression
o Each time an ad is displayed
How to build brand
customer experience
impression
o Each time an ad is served to a user for viewing
AMazon's scale benefits
enables it to thin margins and sustain lower prices o Can "hold breath longer" than competitors like DVD Empire
• Big profitable company • Grew so quickly by crowdsourcing o Instead of hiring people to create different versions, had different people vote on phrases for words like "Poke"
Infrastructure
general management, planning, finance, IS o HRM Recruiting, hiring, training and development o Tech. Development R&D o Procurement
"the cloud"
means a startup can rent the computing resources one previously had to buy at great expense; where app stores give code jockeys immediate, nearly zero-cost distribution to a potential market of hundreds of millions of people worldwide; and where social media done right can virally spread awareness of a firm with nary a dime of conventional ad spending. Crafting a breakout hit is tough, but the jackpot can be immense.
First choice shopping
• Brand: lower search costs, proxies quality, inspires trust
Long tail
more profitable to offer greater volume of less popular products
Metcalfe's Law
network effects/externalities Exchange opportunities • Information, data, money, programs, conversations • Each person ads more value because things foster exchange Staying power • Related to switching costs • When you buy product/service, investment is beyond cost o Need to learn, download software, create files • About product not dying, creating stronger switching costs o Trying to predict future Complementary benefits • Platform o Allowing for the integration of third-party software products and other complementary goods o 90% of automobile manufacturers offer iPod hookup o Allowing 3rd parties to write apps for iPhone
IP Address
o A value used to identify a device that is connected to the Internet o IP addresses are usually expressed as four numbers (from 0 to 255), separated by periods o Change depending on how and where you connect to the internet
Show-rooming effect
• Buying online after going into store to scan prices of products
Bad item implications
not selling, losing brand/customer loyalty
o 1 million users in one week o Android app was downloaded 5 billion times in first week o Only 13 people were working for Instagram at the time that it was sold
disruptive technology/innovation
o 1. Come to market with set of performance attributes not initially valued by existing customers o 2. Performance attributes that customers do value improve to the point where the new tech invades the established market
Six waves of computing
o 1st wave 60s Mainframes o 2nd wave 70s Minicomputers o 3rd wave 80s Personal Computers o 4th wave 90s • Internet computing o 5th wave Mobile computing o 6th wave Ubiquitous/pervasive computing • Some circumstances makes sense to give away
AMazon's 3 pillars
o 3 Pillars: Large selection, customer experience (convenience) and lower prices
AMazon fulfillment
o 3rd party vendors gain access to Prime o Pay Amazon fee for packaging up and shipping item Why • Amazon great at fulfillment Amazon keeps customer relationship data
collaborative filtering
o A classification of software that monitors trends among customers and uses this data to personalize an individual customer's experience o Scale leads to more users doing more things, allowing the firm to collect more observations that fuel greater accuracy in tailoring the user experience
affiliate programs
o A cost-per-action program, where program sponsors (e.g. amazon.com, iTunes) pay referring websites a percentage of revenue earned from the referral o Referring websites to amazon can earn 4 to 15% of sales generated through click-throughs
optical fiber line
o A high speed glass or plastic lined networking cable used in telecommunications
cookie
o A line of identifying text assigned and retrieved by a given Web server and stored in your browser
cookie
o A line of identifying text, assigned and retrieved by a given Web server and stored by your browsers o Browser has been tagged, can build profile associated with your activities
server farms
o A massive network of computer servers running software to coordinate their collective use o Server farms provide the infrastructure backbone to SaaS and hardware cloud efforts, as well as many large-scale internet services
server farms
o A massive network of computer servers running software to coordinate their collective use o Server farms provide the infrastructure backbone to SaaS and hardware cloud methods, as well as many large scale internet services
Quality score
o A measurement of ad performance (CTR) and the quality of your ads, key words and web sites o Google doesn't offer specific details on how quality score is measured, but ads that are seen as relevant and that consumers respond to have higher quality scores o The firm uses quality score multiplied by the maximum CPC to determine an ad's display ranking
A/B Testing
o A randomized group of experiments used to capture data and compare performance among two options studied (A and B) o A/B testing is often used in refining the design of technology products, and A/B tests are particularly easy to run over the internet on a firm's Web site o Amazon, Google and Facebook are among the firms that aggressively leverage hundreds of A/B tests a year in order to improve their product offerings o Amazon has A/B tested wording associated with texts and images, screen placement, size, color and more Experimentation, refinement and retesting
content adjacency problem
o A situation where ads appear alongside the text the advertiser would like to avoid o Negative key words say when to not put an ad where these words appear in a website
semiconductors
o A substance such as silicon dioxide that is capable of enabling as well as inhibiting the flow of electricity o From a managerial perspective, when someone refers to semiconductors, they are talking about computer chips, and the semiconductor business is the chip business
google analytics
o A suite of tracking and analysis tools for free o Premium offerings and support available for a fee
cache
o A temporary storage space used to speed computing tasks
latency
o A term often used in computing that refers to delay, especially when discussing networking and data transfer speeds o Low-latency systems are faster systems
wi-fi
o A term used to brand wireless local-area networking devices o Devices typically connect to an antenna-equipped base station or hotspot, which is then connected to the Internet o Wi-Fi devices use standards known as IEEE 802.11 and various versions of this standard (e.g. b, g, n) may operate in different frequency bands and have access ranges
proxy servers
o A third-party computer that passes traffic to and from a specific address without revealing the address of the connected user
cardboard box (Amazon)
o A to Z
grid computing
o A type of computing that uses special software to enable multiple computers to work together on a common problem as if they were a massively parallel supercomputer o Idle devices attack portions of a complex task
creating the killer app
o As manager, want to expand radar Pay attention to curves and developments Constantly plan out five forces, value chain models • Speak with external conversations (VCs, academics, technologists) • Internal conversations (engineering, marketing, planning) o Don't make workers switch or could leave but try to rotate o Managing an Option Portfolio of Innovations Separate organizations • Take stakes in small firms • Don't let larger organization kill smaller subjects when needed o Creosol bush Branches drop poison to kill all around it so no competition Dominant products often act like that Hedge financial risk, market focus, incentive
IBM's Watson
o Beat past jeopardy champs
Fair Factories' Clearinghouse
o Begun by Reebok who invested millions to create in-house information system to track audits of suppliers o Decided to share information with industry to make industry better/more aware o Hard to pass creation of organization w/Congress but okayed because no prices included o Database has become broader and more valuable as firms that don't adhere are put on list
Oracle
o Biggest database server in world, hires more students than anyone else o Sales and field intern positions
how to deal w/disruptive technology as a manager
o Build a portfolio of options on emerging technologies, investing in firms, start-ups or inhouse efforts The right, but not the obligation, to make an investment • Keep separation from these departments/firms/start-ups is key
Cash convergence cycle
o CCC o Period between distributing cash and collecting funds associated with a given operation (e.g. sales)
Super computers
o CIBC (Canadien International Bank of Commerce) Americans were doing it wrong Could do math to show CIBC's profile less risky and eliminate the need to have hundreds of millions of dollars on hands • Bought supercomputer for 30 million
cost per click
o CPC o The maximum amount of money an advertiser is willing to pay for each click on their ad
click through rate
o CTR o The number of users who clicked an ad divided by the number of times the ad was delivered (the impressions) o The CTR measures the percentage of people who clicked on an ad to arrive at a destination site
Calxeda
o Can put cellphone chips in corporate class computers Run them cheaper because less hardware needed
fault-tolerant
o Capable of continuing operation even if a component falls
YouTUBE
o Chad Hurley and Steven Chen o Bought by Google for 1.65 billion dollars after it was founded only 20 months before o Only accepted Venture Capital from one firm, Sequoia Capital California, invested 11 million dollars in Youtuve which turned into 430 million dollars
Moore's Law
o Chip performance per dollar doubles every 18 months Number of transistors in silicon chip doubles every 18 months • Means power • Microprocessors calculate twice as fast or store twice as much data Cost plummets by factors of 10
Moore's law
o Chip performance per dollar doubles every 18 months o Parabolic dropping in cost over time o Implications Impossible can become possible Special price elasticity • Whole new markets open up as technology gets cheaper
ARM chips
o Chips that run on cellphones (and tablets) o Devices not made to be plugged in, but to have long battery life
collaborative filtering software
o Cinemax by Netflix Technology that monitors trends among customers and uses this to personalize a given customer's experience o Genius by Apple o Amazon's suggestions
click through rates
o Click through rates o Normally well below 1%, but can be 5-30% with well-targeted campaign at certain IP address
Leveraging Data (Netflix)
o Collaborative filtering A classification of software that monitors trends among customers and uses this data to personalize an individual customer's experience Netflix's recommendation system is called Cinemax • Suggests movies in stock so customers don't have to wait • Also a switching cost because customers have already ranked movies, so lose that if they transfer o Churn rate The rate at which customers leave a product or service
supercomputer
o Computers that are among the fastest of any in the world at the time of their introduction
cluster computing
o Connecting server computers via software and networking so that their resources can be used collectively to solve computer tasks
Logistics
o Coordinating and enabling the flow of goods, people, information and other resources
CPA
o Cost-per-action o Charging for advertising whenever a user performs a specified action such as signing up for a service, requesting material, or making a purchase
CPM
o Costs per thousand impressions (the M representing the Roman numeral for 1000)
Microsoft & Switching costs
o Customers stick with Microsoft because of switching costs, even though better products have come along Don't know if new firm will have staying power, would be pain to switch everything from Microsoft
Three curves
o Data storage o Moore's law (microprocessors) o Optical fiber • Data storeage doubles 12 months, more than Moore's Law • Optical fiber (bits/sec) double every 9 months
E-waste
o Discarded, often obsolete technology o Electronic waste o "the effluent of the affluent" o 80% is exported Horrible working conditions where plastic is boiled to get copper wiring o Drinking water needs to be imported from 18 miles away because area is so polluted • Products labeled for recycle often end up in toxic efforts • E-waste management is extremely difficult to monitor and track with rampant loopholes • Slip up on ethics can be caught in an instant with cellphone camera o Managers must be aware of suppliers and partners ethics too • 43 american recycling companies would sell e-waste at profit to foreign countries illegally
optical fiber
o Doubles 9 months, bits per second o DWDM - dense wave d multiplexing
6 computing waves
o First wave The 60s Mainframes o Second wave The 70s Minicomputers • Size of room to size of refrigerator o Mass 128 companies came up and gushed cash o Third wave The 80s Personal computers • First meant to put on computers • Invaded second wave companies o Fourth wave The 90s Internet computing • Monster.com in Maynard, MA o Fifth wave Mobile computing • Nokia became #1 camera company in last decade as placed into mobile phone o Give-away in another device that owned o Sixth wave Ubiquitous/Pervasive computing • Computing embedded everywhere, even in mundane devices Aerosmith • Made more money on a video game (Guitar Hero) than on any of their records o Hermonics company in central square of Cambridge does Guitar Hero
evolving waves of computing
o First wave in 1960s Computing was limited to large, room-sized mainframe computers that only government and big corporations could afford o Second wave in 1970s Refrigerator-sized computers that were as speedy or speedier than first wave but affordable by work groups, factories and smaller organizations o Third wave in 1980s PCs and nearly every white collared American worker had a fast and cheap computer on desk o Fourth wave in 1990s Internet computing • Cheap servers and networks made it possible to scatter data around the world and fast, cheap PCs were owned in industrial world o Computing wave five Mobile smart phones o Sixth wave of pervasive computing Technology is so fast and inexpensive that it is becoming ubiquitously woven into products in ways few imagined years before
Global Positioning System
o GPS o A network of satellites and supporting technologies used to identify a device's physical location
Amazon warehouse
o Get the CRAP (can't realize any profits) out o Amazon uses technology to package individual items and send them out Has stocking occur with no two identical packages the same next to each other so that they can't get them confused o Wireless devices tell where to pick up packages o Products are weighed then labeled and shipped out o 99.9% of packages are delivered on time o Kiva robots can pick up 200 to 400 items per hour
organic search death penalty
o Google dropped JC Penney's rankings from 1st to 71st
Geotargeting methods
o Google knows where you are by IP Address In process of switching from IP4 to IP6 Four numbers from 0 to 255 • _ . _ . _ . _ o Google switches languages over automatically when you go to different place Asks if want another language if spoken there o What is my IP Address.com BC owns IP addresses that start 136.167 o Cellphone provider: Not able to guess too well where from o How else to Geo Target GPS chips • Line-of-sight technology o Doesn't reliably work indoors o Not all devices have GPS WiFi • User's hotspot must be in the wifi database being used, but these databases are often incomplete • Maps wifi IP addresses Cell Tower Triangulation • Limited accuracy, only available on devices with a mobile network • Need cell phone chip • Sees distance from different cell towers to guess where you are
image ads
o Graphical advertising (as opposed to text ads) o Horizontally oriented banners, smaller rectangular buttons, and vertically oriented "skyscraper" ads
Apple/free storage
o Has ridden curves better than anyone else o 5GB of storage for free on iCloud o Get you to buy more of their Apple devices and creates switching costs
Starbucks loyalty
o Have people tie card with Starbucks app and pay with phone o Become gold member with starbucks by game-if-fying behavior with gold hopping around on phone and then Gold Member gets free birthday coffee
internet advertising bureau
o IAB o A nonprofit industry trade group for the interactive advertising industry o The IAB evaluates and recommends interactive advertising standards and practices and also conducts research, education and legislative lobbying
geotargeting
o Identifying a user's physical location (sometimes called geolocation) for the purpose of delivering tailored ads or other content
What's going to change next ten years?
o Important is what's not going to change in 10 years Stability Can build business around it
Value Chain
o Inbound logistics to operations to outbound logistics to marketing and sales to service
3 factors driving online ad growth
o Increased user time online o Improved measurement and accountability o Targeting
Value chain
o Infrastructure: general management, planning, finance, IS o HRM: recruiting, hiring, training and development o Tech Development: R&D o Procurement o Inbound logistics to operations to outbound logistics to marketing and sales to service
Patents
o Intellectual property can be patent if knowledge is deemed useful, novel and nonobvious Typical patents for 20 years in US from date of patent application o Patents Considered unfair against start-ups, single patent case's litigation costs can be $5 million o Secrecy, lead time, sales skills and manufacturing rank higher than patents in enabling firms to profit from innovations
dark web
o Internet content that can't be indexed by Google and other search engines
M-Pesa
o Kenyan effort using text messaging o 19 million have M-Pesa accounts while only 10 have bank accounts o Kenyan dream: son squirts money back to Mom Economic lubricant 1/3 of Kenyan economy travels through text messages on mobile phones
Amazon's private brand labels
o Kindle o AmazonBasics (cables, batteries and other electronic accessories) o Pizon (kitchen gadgets) o Strathwood (outdoor furniture) o Pike Street (bath and home products) o Denali (tools) o These allow amazon to bargain more with suppliers because can enter market themselves
Peer production
o Leverages users to produce content or provide services o Individuals create huge companies by using skype and having computers find others using Skype in area
Cheryl Sandburg
o Made advertising at Google, is now COO at Facebook o Billionaire now
Moore's Law
o Makes technology faster and cheaper in a way that is empowering poor and destroying the planet fast, cheap computing. And as computing gets both faster and cheaper, it gets "baked into" all sorts of products and shows up everywhere: in your pocket, in your vacuum, and on the radio frequency identification (RFID) tags that track your luggage at the airport.
How to compete in network effects market
o Move early EBay all over US Yahoo beat EBay by 5 months in Japan, long enough to sustain that market for Yahoo • Japanese and other European countries didn't communicate because of language barrier o Japanese not comfortable with English o German/Europe not comfortable with Japanese o Subsidize product adoption Give away some money to get people to use iPod app o Leverage viral promotion Use Farmville/RunKeeper to get viral promotion o Redefine the market or leverage convergence Wii's competition wasn't to compete w/ps3 or xbox (mostly male sales) WiiFit became #1 video game in world o Alliances and partnerships o Distribution channels How Netflix has been doing this when working w/other firms o Seed the market with complements Sony sold BlueRay radically underpriced with PS2 to seed market o Encourage the development of complementary goods Apple encouraging venture funds for ios apps • Facebook has done this too o Maintain backward compatibility When Apple moved to Intel platform, took old power PC processor and put Intel processor in there But used Rosetta to make old stuff compatible with new product o Rivals: be compatible with larger networks Apple became compatible with Intel o Incumbants: constantly innovate to create a moving target POM made device able to download songs from iTunes onto device • Apple would keep moving so POM would have to move to access device o Then apple sued because of USB consortium o Large, well-known followers: preannouncements Announce that going to add feature from other firm to stop it from becoming huge • Osbourne Effect o Osbourne computing company said new version of OsBourne computer was going to be awesome, and as result no one bought original version
Grid computing problems
o Must complete task a before b, b before c, c before d, etc o Can't go on to next stage without completing first task o Divide and conquer does not work
Battling a leader w/network effects
o Need to overcome value of incumbent's Staying costs (staying power) Complementary benefits • CandyCrush Installed base (exchange) Technological functionality o With new, incompatible entrant's Technological functionality
Reed Hastings
o Netflix cofounder o Appointed to Board of Directors for Microsoft and Facebook o Lost users transitioning to digital streaming but has since bounced back o "We named it Netflix for a reason, not DVD-by-mail"
Four characteristics for advantage of assets to yield sustainable advantage
o Non-substitutable, value, imperfectly imitable and rareness o Invest in those four things to make successful management decisions
flash memory
o Nonvolatile, chip based storage, often used in mobile phones, cameras and MP3 players o Sometimes called flash RAM, flash memory is lower than conventional RAM but holds its charge even when the power is out
CISCO
o One of most profitable firms on planet o Sells routers and switches which forwards information from one server to another o 70-85% of the market share o Built by Sandy Learner/Werner?
rich media ads
o Online ads that include animation, audio or video o Encourage user engagement/interaction sometimes
Advergames
o Online mini games o For longer term, immersive brand engagement
Flash sales
o Operating deep discounts of a limited quantity of inventory o Flash sales often run for a fixed period or until inventory is completely depleted o Players include Guilt Groupe and Amazon's MyHabit in fashion, and OneKingsLane in home décor
Zara limitations/risks
o Operations Natural disaster in Spain Government stability - war Terrorism • 3/11 incident in Spain shut down their railroad system Labor strikes o Macroeconomic Issues European currency • Could help or hurt
pay per click
o PPC o A concept where advertisers don't pay unless someone clicks on their ad
wholesale pricing
o Paying publishers for titles then selling those at whatever price it wished
Network effects are bad for innovation
o Platitude Yes, network effects lower competition against an established standard But also increases innovation within a standard • GLU o Needed 56 versions of monopoly for its phones when added it to them Also needed to test those versions o One of earlier phone players • Apple o Creates really big market with phones and itouches o Attracted game-creaters • PocketGems o Apple has 60% adapted to ios7 o Table is loaded with all android devices but iPhone is more attractive market because phones all have only 2 screen sizes
dynamic pricing
o Pricing that shifts over time, usually based on conditions that change demand o E.g. charging more for scarce items o Consumers act angrily if they feel they've been taken advantage of
liquidity problems
o Problems that arise when organizations cannot easily convert assets to cash o Cash is considered the most liquid asset, that is the most widely accepted with a value understood by all
Reasons to not go Public early
o Publicly traded company has to report numbers Hastings regretted going first because then Walmart/Blockbuster designed similar business
Assets for Competitive Advantage
o Rareness Asset limited in supply or difficult to acquire? o Value Does asset yield value to the firm/customers? o Imperfectly imitable Is the asset impossible to imitate? o Non-Substitutable Is the asset without comparable substitutes
Amazon's key
o Relentless customer focus o Makes senior members answer calls twice a year One click ordering Reviews Recommendations Bundles Look and search Where's my stuff Supersaver shipping o Highest American Customer Service Index (ACSI) in history
AWS
o Rent industrial-strength computing capacity on an as-needed basis o EC2 (Elastic Computing Cloud) Provides the equivalent of physical computing hardware o S3 (Simple Storage Service) Provides Web-based storage o Dozens of other service offerings
EC2
o Rent industrial-strength computing capacity on an as-needed basis o EC2 (Elastic Computing Cloud) Provides the equivalent of physical computing hardware o S3 (Simple Storage Service) Provides Web-based storage o Dozens of other service offerings
Query
search
Market capitalization
share price times number of shares
Three interrelated pathways threatening Moore's law
size, power and heat
Straddling
• Attempts to occupy more than one position while failing to match the benefits of a more efficient, singularly focused rival
Data's Big Role
• "I can justify the spend with our data and do so with a far greater degree of confidence than the television networks... The goal is to become HBO faster than HBO can become us" o Netflix Content Chief Ted Sandros o Netflix is bigger than most-watched cable channel (Disney channel) and watched more than HBO
Qwikster issues
• @Qwikster is a pot smoking elmo o Didn't secure brand assets before announcing switch Had website Twitter handle was failure
bandwidth caps
• A limit, imposed by the Internet service provider (e.g. Comcast/a cable or phone company) on the total amount of traffic that a given subscriber can consume o Usually per each billing period
Scale advantages
• Advantages related to size • Blue Nile o Smaller, no offices, electric bills, only 115 employees o Zales has to pay all those and still makes same profits o 465 independent jewelry stores shut down after Blue Nile
Amazon's bargaining power w/suppliers
• Amazon's goals are to keep turns high and CCC low, collecting from customers right away and delaying payment to suppliers o Has bargaining power w/suppliers because of amount sold
First sale doctrine
• Applies to distribution rights of physical copies • Netflix can resell/lendout hard copies of DVDS • This does not apply to replications, including streaming o In DVD business, Netflix could buy DVDs whether or not the company who had reproduction rights owned it streaming is a different game • First Sales Doctrine does not apply to digital content Reasons libraries work Can buy books and lend them out/sell them Doesn't apply to streaming
How to up search results #
• How to game system o SEO Search Engine Optimization • Rank determined by # of pages linking to the result and PageRank o Get SEO bumped up by asking people to link to me or making a bunch of bogus websites • Link Fraud / Link Farming / Spamdexing o Creating a series of bogus websites, all linking back to a page, in hopes of increasing that page's results in organic search JC Penny #1 in all categories like Samsonite, dresses Black hat SEO • Google dropped hammer and moved JC Penney to below 70 on Google • Important integrity of search results o Dealing with partner • JC Penney now struggling because of it • Popular content o Blog online, get people to link to it
Porter's Five Forces
• Intensity of Rivalry among existing Competitors • Threat of new entrants • Threat of substitute goods or services • Bargaining power of buyers • Bargaining power of suppliers
Switching costs
• Learning costs o Investment in learning a new interface and commands • Information and data o Reentering data, converting files or databases or loss of contributions on incompatible systems • Financial commitment o After paying money, have made investment • Contractual commitments o Have to pay money to break contract • Search costs o Time and money spent evaluating alternatives • Loyalty programs o Loss of "miles" or "points" (all enabled and driven by software
Butterflies or barnacles
• Move-along or loyal customers switching costs play a role
Attractive to be a Netflix partner
• Non-linear, binge watching and multi-screen works for customers and content creators o Instead of having to wait awhile or forgetting where you are o Can go back and watch previous one o Can do different lengths for different episodes
LAMP
• Open source technology • Powers facebook, google and big industrial companies • Hadoop o Data storage • Not only about building advantage
How to eliminate stocker fees
• Payments by suppliers for prime shelf space o Online ratings for foods
Strategic positioning
• Performing different tasks than rivals, or the same tasks in different ways
mass customization
• Promoting titles via pages and custom-targeted ads • Netflix can offer feature/change wording o Netflix used 7 trailers to see which one gained most interest
Semiconductor
• Refers to "computer chips" o E.g. the semiconductor industry is the chip business • Chips for storage or chips for calculation o Calculation chips are microprocessors
volatile memory
• Requires a charge to hold its value o RAM in PC, which loses data when the power is cut o When power goes out, all is lost that hasn't been saved o RAM chips
non-volatile memory
• Retains value even when not charged o Flash memory In camera/smartphone • Solid state o No moving parts o As opposed to hearing a hard drive crash o Solid state is more reliable because parts don't move o Storage that retains data even when powered off o Flash memory, hard drive, dvd storage
Tragedy of TiVo
• Rivals created reasonably good copies of TiVo technology o DirecTV had to pay some damages to TiVo o Comcast/Verizon both gave Motorola boxes • Lack of access to critical distribution channels o The cable guys put boxes in o Cable did not like TiVo because it could gather data while they could not
Retargeting
• Showing ads for products & services from a site that a user has previously visited o Also called remarketing • Cookies are about tagging on website and tracking on other websites
crowdsourcing example
• Technique in which a firm states a problem it would like solved, the reward it will provide, and then makes this available to a broader community in the form of an open call Outsourcing a task to a large, and undefined population in the form of an open call Do this and first to do it will win an award Hiring technique as well
Point-of-sale system
• Transaction processing system that captures customer purchase information o Point of sales system Tells what's selling, but not what customers want to see o Cash register: captures what has actually sold in the store
Economies of scale
• When a firm can spread costs across increasing units of production • Cost for MS/Google to build data centers are same but Google has 65% of market share and advertisers want to go where more customers are o 70% of advertisers use google
network effects
• When a product or service becomes more valuable as more people use it