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Using IT to add value: Innovation versus Efficiency

Using IT to add value: Innovation versus Efficiency. M A R G I N. Find. Solve. Choose. Evaluate. Execute. M A R G I N. Value Configuration Analysis. Shop. Network. Resolve Customer Problem. Facilitate Customer Relationships. Chain. Improve Internal Efficiencies.

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Using IT to add value: Innovation versus Efficiency

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  1. Using IT to add value: Innovation versus Efficiency

  2. M A R G I N Find Solve Choose Evaluate Execute M A R G I N Value Configuration Analysis Shop Network Resolve Customer Problem Facilitate Customer Relationships Chain Improve Internal Efficiencies

  3. Firm Infrastructure Human Resources Management M A R G I N Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales After-sales Service M A R G I N Value Chain Value created by transforming inputs into products

  4. Value Shop Firm Infrastructure Human Resources Management InfrastructureSupport Technology Development Procurement Problem Finding & Acquisition Problem Solving Choice Simon’s Problem Solving Model Control/ Evaluation Execution Value created by providing solutions, not services

  5. Value Network • Mediating technology facilitates exchange relationships Network promotion and contract management • Invite and select customers tojoin network • Initialize, manage andterminate contracts Firm Infrastructure Human Resources Management Technology Development Procurement Service provisioning • Establish, maintain andterminate links • Billing forvalue received Infrastructure operation • Maintain andrun physical and information network Value derived from service of linking customers

  6. M A R G I N Find Solve Choose Evaluate Execute M A R G I N Value Configuration Examples Shop Network Resolve Customer Problem Facilitate Customer Relationships Chain Improve Internal Efficiencies

  7. Do not confuse efficiency with innovation • “Price compression is killing innovation” • Michael Capellas, Compaq Computer CEO, Business Week (Sep 24, 2001), pg 102 • “Don’t mistake reinventing the wheel for innovation” • Related to Goldman Sachs $100 million investment in Webvan – current value $0 • Allan Sloan, “Dumb Deals 101”, Newsweek (Sep 10, 2001) pg 41

  8. Types of Innovation(Christensen & Overdorf) • Sustaining Innovation • Respond to evolutionary market changes • Make a product or service perform better • Disruptive Innovation • Dealing with disruptive market changes • Create an entirely new market

  9. Innovation as Value Proposition • Three components of value proposition • Value Shop (VS) • Value Chain (VC) • Value Network (VN) • Total Value Proposition (TVP) is the product • ∆TVP = ∆VS * ∆VC * ∆VN • Disruptive innovation requires a new business model • Efficiency is incomplete sustaining innovation • VC is the focus

  10. Value Added Strategies

  11. M A R G I N Find Solve Choose Evaluate Execute M A R G I N Value Configuration StrategiesWhere are Alibris and BBA? Shop Network Resolve Customer Problem Facilitate Customer Relationships Chain Improve Internal Efficiencies

  12. M A R G I N Find Solve Choose Evaluate Execute M A R G I N Value Configuration Strategies Amazon: shared information Cisco: solves problems Compaq: mass production

  13. M A R G I N Find Solve Choose Evaluate Execute M A R G I N Value Configuration Strategies Sun: Javaenablesinternet Amazon: shared information Cisco: solves problems EBay: auctionnetwork Napster: music distribution Dell: mass customization Compaq: mass production

  14. Where does IT fit into this? • Use IT as a ready lever for efficiency improvement • By improving products and services • By improving operations • By improving the customer interfaces • Use IT as a lever to aid innovation • By making new benefits possible • By developing new processes • By creating new customer networks • Use IT to create new business model • Extended Value Chain • Value Shop • Value Network

  15. Value Added Strategies VS VN VC

  16. References • Chan K.W. and Mauborgne R. “Value Innovation: The Strategic Logic of High Growth”, Harvard Business Review, Jan-Feb 1997, pp 103-112. • Christensen, C.M. and Overdorf. M. “Meeting the Challenge of Disruptive Change”, Harvard Business Review, Mar-Apr 2000, pp 67-76. • Gobeli, D.H. & Rudelius, W. “Managing Innovation: Lessons from the Cardiac-Pacing Industry”, Sloan Management Review, 26:4 (Summer 1985), pp. 29 – 33 • Hansen, M.T. and von Oetinger, B. “Introducing T-Shaped Managers: Knowledge Management’s Next Generation”, Harvard Business Review, Mar 2001, pp 107-116. • Stabell, C.B. and Fjeldstad, O.D. “Configuring Value for Competitive Advantage: on Chains, Shops, and Networks”. Strategic Management Journal, 19 (1998), pp 413-437.

  17. Preview for Next Week • 1:00 – 2:00: Open Source • 2:15 – 3:30: Ben Berry – Wireless Applications • 3:45 – 5:00: Outsourcing

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