copyright © 2002 by marketspace llc rayport, jaworski e-commerce chapter 6 enhanced lecture slides...
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Copyright © 2002 by Marketspace LLC
Rayport, Jaworski
e-Commerce
Chapter 6 Enhanced Lecture Slides
Implementation
Exhibits and Tables
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Implementation — Today’s Objective
To introduce the firm-specific infrastructure that must be created and configured to go to market and achieve the firm’s strategic goals
How can the business
communicate with its target customers?
How can the business
communicate with its target customers?
How can the business go to
market?
How can the business go to
market?
Chapter 5
Chapter 6
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Chapter 6:Implementation
The general implementation framework
The importance of implementation
A framework for the delivery system and the five components of the delivery system
Online and offline integration
The categories of offline innovation and the offline innovation process
The new logic behind new-economy innovation and the new-economy innovation frameworks and processes
Case study: Schwab
Conclusion
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Chapter 6:Implementation
The general implementation framework
The importance of implementation
A framework for the delivery system and the five components of the delivery system
Online and offline integration
The categories of offline innovation and the offline innovation process
The new logic behind new-economy innovation and the new-economy innovation frameworks and processes
Case study: Schwab
Conclusion
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Exhibit 6–1: Marketspace Evolution and Need for Continuous Innovation
Brand promise Branding Marketing communications Customer interface
Brand promise Branding Marketing communications Customer interface
Source: Monitor analysis
Objectives Achieve strategic goals Adjust product offering
and delivery system to rapidly changing marketspace environment
The implementation follows from and is informed by branding, communication and the customer interface choices.
Implementation
Deliver on the promised
experience
Renew/innovate thecustomer experience
Innovation Process
Delivery System
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Supporting Slide 6–A: Two Integral Components of Implementation
Objectives Deliver the promised
customer experience
Turn strategic intent / concepts into results
Objectives Maintain fit between
marketspace evolution and the company’s delivery system and product offering
Build theinfrastructure to
deliver on the brand promise
Innovate / renew the customer
experience
Source: Monitor analysis
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Chapter 6:Implementation
The general implementation framework
The importance of implementation
A framework for the delivery system and the five components of the delivery system
Online and offline integration
The categories of offline innovation and the offline innovation process
The new logic behind new-economy innovation and the new-economy innovation frameworks and processes
Case study: Schwab
Conclusion
Last Updated: 03/18/02Copyright 2002 by Marketspace LLCSource: Adapted from Thomas V. Bonoma, The Marketing Edge, The Free Press, 1985.
Exhibit 6–2: Why Does Implementation Matter?
Poor
Good
Appropriate InappropriateStrategy
Implementation
Four conditions can be experienced by firms in the marketplace: success, roulette, trouble and failure.
Success
All that can be done to ensure success has been done
Success
All that can be done to ensure success has been done
Roulette
Good execution can mitigate poor strategy
or Same good execution
can hasten failure
Roulette
Good execution can mitigate poor strategy
or Same good execution
can hasten failure
Trouble
Poor execution hampers good strategy -- management may never become aware of strategic soundness because of execution inadequacies
Trouble
Poor execution hampers good strategy -- management may never become aware of strategic soundness because of execution inadequacies
Failure
Difficult to diagnose -- bad strategy masked by poor execution
More difficult to fix -- two things are wrong
Failure
Difficult to diagnose -- bad strategy masked by poor execution
More difficult to fix -- two things are wrong
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Exhibit 6–3: Challenges of Online Implementation
Essential Challenges of Online Implementation
Customer-Driven
Customer-Driven
Organization-Driven
Organization-Driven
More visibility of errors = stronger
competitive implications of errors
More visibility of errors = stronger
competitive implications of errors
Lower switching barriers = increased importance of good
implementation
Lower switching barriers = increased importance of good
implementation
More complex linkages = increased
complexity of implementation
More complex linkages = increased
complexity of implementation
More fluid organizational boundaries =
increased complexity of implementation
More fluid organizational boundaries =
increased complexity of implementation
More dynamic market environment =
increased complexity of implementation
More dynamic market environment =
increased complexity of implementation
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Poor product fulfillment is one of the top consumer complaints about e-commerce businesses. In 1999, only 74 percent of all e-commerce purchases were fulfilled on time.
eBay’s Network Shutdown eBay’s Network Shutdown
In June 1999, eBay suffers a 22-hour site shutdown due to technical difficulties.
EBay’s stock loses more than 20 percent of its value.
EBay loses significant revenues.
Auction sellers’ confidence in eBay’s abilities is weakened.
Rival auction sites gain additional business.
In June 1999, eBay suffers a 22-hour site shutdown due to technical difficulties.
EBay’s stock loses more than 20 percent of its value.
EBay loses significant revenues.
Auction sellers’ confidence in eBay’s abilities is weakened.
Rival auction sites gain additional business.
Buy.com Pricing and FulfillmentBuy.com Pricing and Fulfillment
Buy.com outsources most of its infrastructure services, which results in implementation problems.
Buy.com has developed a poor reputation for advertising products that become back-ordered for weeks.
Buy.com faces a lawsuit because it charged for orders that could not be filled.
Negative publicity and low confidence in the company result.
Buy.com outsources most of its infrastructure services, which results in implementation problems.
Buy.com has developed a poor reputation for advertising products that become back-ordered for weeks.
Buy.com faces a lawsuit because it charged for orders that could not be filled.
Negative publicity and low confidence in the company result.
Supporting Slide 6–B: The Effects of Poor Implementation
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Built to Last:
The Offline World
Built to Rebuild (Fast):
The Online World
The name of the game is to consistently outplan the competition. An elaborate strategic planning process is important for long-term success.
With no time for elaborate planning (“be fast or be last”), frequent experimentation and adaptability, as well as locking in alliances earlier than competitors, are the keys to success.
Organizational growth is based on organic growth with selective use of acquisitions to fill pockets of deficiencies. (Post-merger integration processes are usually slow.)
Acquiring competencies, assets and customer base are far more important than organic growth. The definition of “the organization” is flexible, and hence, so is the design of organizational architecture.
Scaling up requires years of building up physical assets and brand equity.
Scaling up takes months and is based on information assets.
Growth is constrained by the limited number of available market opportunities.
Growth is constrained by the company’s ability to capitalize on the overload of opportunities (because of people, infrastructure, etc.)
Most successful companies are not founded on a "great idea.”
Most successful companies are based on a “great idea.”
Sources: Frederick P. Brooks, Built to Last, Harper Business.
Supporting Slide 6–C:Point-Counterpoint: Built to Last or Built to Rebuild?
“Smart Way to Start: 10 Principles of the New Economy,” Business 2.0 (March 2000).
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Chapter 6:Implementation
The general implementation framework
The importance of implementation
A framework for the delivery system and the five components of the delivery system
Online and offline integration
The categories of offline innovation and the offline innovation process
The new logic behind new-economy innovation and the new-economy innovation frameworks and processes
Case study: Schwab
Conclusion
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Supporting Slide 6–D: A Framework for the Delivery System
Value PropositionValue Proposition
The delivery system of a company is the most detailed and concrete expression of the company’s value proposition.
Business ModelBusiness Model
Product OfferingProduct Offering
DELIVERY SYSTEM
The value proposition, the product offering and the
business model each determine the requirements for the construction of the
delivery system.
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Source: Clayton M. Christensen, “Meeting the Challenge of Disruptive Change,” Harvard Business Review 78, no. 2 (March-April 2000).
Exhibit 6–4: The Delivery System Needs to Support and Reinforce the Resource System
ProcessesProcesses
AssetsAssets
SystemsSystems
PeoplePeople
Mapping the Resource System
Delivery System
Supply ChainsSupply Chains
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Supporting Slide 6–E: The Five Components of the Delivery System
ProcessesProcesses
Supply chainsSupply chains
PeoplePeople
SystemsSystems
AssetsAssets
• Human-resources system that places high value on the recruitment, selection, training, development and evaluation of key personnel
• Routines or established procedures for the organization
• Can be divided into physical and information-based assets
• The patterns of interaction, coordination, communication and decision making that employees use to transform resources into customer value
• Provider of place for transactions, where buyers and sellers come together to conduct business
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Supporting Slide 6–F: Processes
PeoplePeople
ProcessesProcesses
Supply ChainsSupply Chains
Because the online firm can play a number of roles, the following processes must be configured by online firms during implementation:
1. Resource allocation process
2. Human-resource management process
3. Manufacturing and distribution process
4. Payment and billing processes
5. Customer support and handling processes
AssetsAssets
SystemsSystems
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
B2C (Business-to-consumer)B2C (Business-to-consumer)
Stock-it-yourself
Outsource warehousing
Drop ship
Fulfillment intermediaries
Stock-it-yourself
Outsource warehousing
Drop ship
Fulfillment intermediaries
B2B (Business-to-business)B2B (Business-to-business)
Customer-centric
Vertical hubs
Customer-centric
Vertical hubs
C2C (Consumer-to-consumer)C2C (Consumer-to-consumer)
Much like a vertical hub, many sites (e.g., eBay) have created customer-to-customer sales
Provides a forum for buyers and sellers to meet
Buyers and sellers trade directly (eliminating intermediaries)
A global marketplace with a large and interested trading company
Much like a vertical hub, many sites (e.g., eBay) have created customer-to-customer sales
Provides a forum for buyers and sellers to meet
Buyers and sellers trade directly (eliminating intermediaries)
A global marketplace with a large and interested trading company
C2B (Consumer-to-business)C2B (Consumer-to-business)
C2B companies include auction services like Priceline.com. Individual consumers place bids with businesses, and businesses decide whether to sell.
Also includes consumer group buying companies like Mercata.com.* Mercata.com is a trading community that lowers its prices as more people purchase a product. Mercata allows consumers from around the world to achieve group scale economies.
C2B companies include auction services like Priceline.com. Individual consumers place bids with businesses, and businesses decide whether to sell.
Also includes consumer group buying companies like Mercata.com.* Mercata.com is a trading community that lowers its prices as more people purchase a product. Mercata allows consumers from around the world to achieve group scale economies.
Exhibit 6–5: Four Types of Supply Chains Found in Marketspace
* Mercata.com is no longer in business
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Chapter 6:Implementation
The general implementation framework
The importance of implementation
A framework for the delivery system and the five components of the delivery system
Online and offline integration
The categories of offline innovation and the offline innovation process
The new logic behind new-economy innovation and the new-economy innovation frameworks and processes
Case study: Schwab
Conclusion
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Fulfillment systems
Customerinterface
Online Offline
Yahoo!
Amazon.com
BN.com
McD
on
ald
’s
Eg
gh
e ad
*
Exhibit 6–6: Where to Play Online and Offline
Online and offline integration is most complex for hybrid companies. A simple matrix provides examples of both pure-play and hybrid companies:
Due to their dual-interface nature, hybrid firms face issues that pure-play firms do not.
* Egghead is no longer in business
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Disadvantages: Dual-organization hybrids
Disadvantages: Dual-organization hybrids
Advantages:Single-organization hybrids
Advantages:Single-organization hybrids
Customer benefits
People
Taxes
Valuation
Systems
Customer benefits
People
Taxes
Valuation
Systems
Advantages:Dual-organization hybrids
Advantages:Dual-organization hybrids
Coordination processes
License to cannibalize
People
Allocations
Taxes
Valuation
Coordination processes
License to cannibalize
People
Allocations
Taxes
Valuation
Disadvantages:Single-organization hybrids
Disadvantages:Single-organization hybrids
Coordination and cooperation process
People
Allocations
Coordination and cooperation process
People
Allocations
Avoiding customer confusion
Consistent integration of online and offline customer service
Managing a consistent brand
Avoiding customer confusion
Consistent integration of online and offline customer service
Managing a consistent brand
Supporting Slide 6–G: Advantages and Disadvantages Single-Organization and Dual-Organization Hybrids
Whether structured as a single or dual organization, there are advantages and disadvantages to housing the online and offline interfaces in a hybrid firm.
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Chapter 6:Implementation
The general implementation framework
The importance of implementation
A framework for the delivery system and the five components of the delivery system
Online and offline integration
The categories of offline innovation and the offline innovation process
The new logic behind New Economy innovation and the New Economy innovation frameworks and processes
Case study: Schwab
Conclusion
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Supporting Slide 6–H: The Categories of Offline Innovation
Line extensionsLine extensions
Changing the basis of competition
Changing the basis of competition
New industriesNew industries
• Incremental advances to an existing product
• New competitive position or niche in market
• Innovations that can create a new industry
3M, a leading offline innovator, describes three categories of innovation development. Each has a different research process and product time frame.
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Laboratories Primary
Activities Time
Frame Innovation
Type
Division Laboratories
Product development
Product control
Technical service
Today’s business: 0–3 years
Line extension
Sector Laboratories Sector
technology development
3–10 years
Changing the basis of competition
Central Research New
technology development
10-plus years
New industries
3M’s Research Paradigm
Key TakeawaysKey Takeaways
Source: Ernest Gundling, The 3M Way to Innovation, (Kodansha America Inc., 2000).
Traditional offline innovation took years and emphasized sustainable and gradual innovation.
Marketspace still offers room for incremental innovation, but emphasis shifts to more drastic innovations.
High information content of innovation objects increases speed of innovation from years to months or even shorter periods.
Short history of marketspace means new collaborators and complementors become available frequently.
Traditional offline innovation took years and emphasized sustainable and gradual innovation.
Marketspace still offers room for incremental innovation, but emphasis shifts to more drastic innovations.
High information content of innovation objects increases speed of innovation from years to months or even shorter periods.
Short history of marketspace means new collaborators and complementors become available frequently.
Table 6–1: Innovation Used to be Slow and Gradual in the Offline World
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Innovation by DoodlingInnovation by Doodling
Innovation by DesignInnovation by Design
Innovation by DirectionInnovation by Direction
Exhibit 6–7: The Offline Innovation Process Was Internal to the Firm
The offline world views innovation as a funnel process with three distinct phases. Ideas are eliminated during each phase, until only the most promising remain.
First step: Brainstorm.
Next: Cull the ideas that are the most effectiveand promise greatestcustomer acceptance.
Finally: Refine ideas through market research, test runs,
and further testing of viability.
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Chapter 6:Implementation
The general implementation framework
The importance of implementation
A framework for the delivery system and the five components of the delivery system
Online and offline integration
The categories of offline innovation and the offline innovation process
The new logic behind new-economy innovation and the new-economy innovation frameworks and processes
Case study: Schwab
Conclusion
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
New Logic Behind the New-Economy InnovationNew Logic Behind the New-Economy Innovation
It is fundamentally shaped by the dynamic nature of online business.
New innovation frameworks try to incorporate the new focus on coevolution of technology and customers.
New innovation processes are emerging as applied versions of these new innovation frameworks.
High investment costs are a key constraint in the innovation selection process, and those costs are higher offline than online.
Innovation is no longer an optimization within given constraints. The fluid nature of online companies and abundance of capital mean the online companies do not have to focus on optimization.
The locus of innovation selection moves from inside the firm’s boundaries to the market outside. The company can get direct customer feedback
Companies use adaptive innovation, or a “sense and respond” approach, instead of trying to “guess right the first time.” Online companies are eager to innovate, and they tolerate imperfection.
It is fundamentally shaped by the dynamic nature of online business.
New innovation frameworks try to incorporate the new focus on coevolution of technology and customers.
New innovation processes are emerging as applied versions of these new innovation frameworks.
High investment costs are a key constraint in the innovation selection process, and those costs are higher offline than online.
Innovation is no longer an optimization within given constraints. The fluid nature of online companies and abundance of capital mean the online companies do not have to focus on optimization.
The locus of innovation selection moves from inside the firm’s boundaries to the market outside. The company can get direct customer feedback
Companies use adaptive innovation, or a “sense and respond” approach, instead of trying to “guess right the first time.” Online companies are eager to innovate, and they tolerate imperfection.
Supporting Slide 6–I: What is the New Logic Behind theNew-Economy Innovation?
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Offline Trade-offs / Principles Supporting Funnel ApproachOffline Trade-offs / Principles Supporting Funnel Approach
Online PrinciplesOnline
Principles
Very high investments are required to launch new innovation.
Limited resources force choices about which innovations to pursue.
Trade-offs and choices are made inside the organization before products hit the market.
Time-to-market and first-mover imperative need to be balanced with the time required to gather customer input.
Launching early increases risk of failure, and flops must be avoided because of the high costs and damage to brand equity.
Moderate investments are required to launch new products and services.
Markets decide the future of new innovations, with no need for firms to make choices internally.
First-mover imperative can be achieved while continuing to gather customer input.
Beta versions allow for revisions and customization, which benefit innovator.
The keys drivers that determine the success of innovation and implementation are:
– Customer base– Customer data analysis– Knowledge management
Table 6–2: Offline Innovation Process vs. Online Innovation Process
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Disruptive TechnologiesFramework
Disruptive TechnologiesFramework
Dorothy Leonard Innovation Framework
Dorothy Leonard Innovation Framework
Supporting Slide 6–J: The New-Economy Innovation Frameworks
« Leonard categorizes innovation into five groups:
• User-driven enhancement
• Developer-driven development
• User-context development
• New application or combination
of technologies
• Technology/market coevolution
« Leonard categorizes innovation into five groups:
• User-driven enhancement
• Developer-driven development
• User-context development
• New application or combination
of technologies
• Technology/market coevolution
« Create an entirely new market through the introduction of a new kind of service or product.
« The performance levels of these disruptive technologies progress faster than market demands and will more completely fulfill consumer expectations later in the product’s life cycle.
« Create an entirely new market through the introduction of a new kind of service or product.
« The performance levels of these disruptive technologies progress faster than market demands and will more completely fulfill consumer expectations later in the product’s life cycle.
The ability of online firms to rapidly and continuously adapt and improve has led to innovation frameworks that focus on the coevolution of technology and customers. Two frameworks are particularly useful in addressing these challenges.
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Source: Clayton M. Christensen, The Innovator’s Dilemma (Harvard Business School Press, 1997).
Time
Pro
du
ct P
erfo
rman
ce
Disruptive technological
innovation
Performance demanded at the
low end of the market
Performance demanded at the high end of the
market
Progress due to sustaining
technology
Progress due to sustaining
technology
Exhibit 6–8: New Innovation Frameworks Addressing Coevolution Have Emerged
Christensen frames disruptive technologies as innovations that create new markets through the introduction of new services and products.
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
In the early days of InternetIn the early days of Internet
Over timeOver time
Supporting Slide 6–K: Amazon.com as Example of Disruptive Technologies
The Internet has proven to be a disruptive innovation for many companies and industry sectors.
Innovation
Amazon.com sold only books, without many frills or value-added services.
Amazon.com sold only books, without many frills or value-added services.
Amazon.com upgraded its bookselling offering by adding several features:
• Reviews by customers
• One-click buying
• Personalized recommendations for book purchases
Amazon also added new shopping categories (music, electronics) and other forms of commerce (auctions, zShops).
Amazon.com upgraded its bookselling offering by adding several features:
• Reviews by customers
• One-click buying
• Personalized recommendations for book purchases
Amazon also added new shopping categories (music, electronics) and other forms of commerce (auctions, zShops).
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
3
2
1 4
5
Developer-driven development
Technology/market coevolution
User-context development
User-drivenenhancement
New application or combination of technologies
High Low
High
LowM
atu
rity
of
tech
no
log
y d
esig
n
Alignment of product linewith current customer base
Source: Dorothy Leonard-Barton, Wellsprings of Knowledge (Harvard Business School Press, 1996).
Exhibit 6–9: New Innovation Frameworks Addressing Coevolution Have Emerged
Next we consider the Dorothy Leonard Innovation Framework.
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Supporting Slide 6–L: Dorothy Leonard Innovation Framework
New application or combination of technologies
New application or combination of technologies
Technology/market coevolutionTechnology/market coevolution
User-driven enhancementUser-driven enhancement
Developer-driven developmentDeveloper-driven development
User-context developmentUser-context development
• No-risk product improvements such as lowering product price or adding low-cost enhancements.
• New way of meeting an existing consumer need
• Positioning and development to meet a previously unexpressed need
• The application of established technology to a new industry
• Occurs when marketspace is undeveloped, user behavior is not well defined, and product offerings are heavily influenced by technology
While this framework was developed in an offline context, many of its principles apply to the online environment.
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Napster as an Example of Technology and Market CoevolutionNapster as an Example of Technology and Market Coevolution
Napster’s technology allows easy downloading, sharing and playing of music files.
Napster’s technology was not intended to be a major commercial product.
Napster has been adopted because of the sheer demand of users. In 1999 (the year Napster was launched), an estimated 1 million of the 10 million online music buyers were Napster users.
The behavior of music buyers changed as a result of this new technology.
Napster’s technology was originally developed for MP3 files but has already been extended to other applications.
Napster’s technology allows easy downloading, sharing and playing of music files.
Napster’s technology was not intended to be a major commercial product.
Napster has been adopted because of the sheer demand of users. In 1999 (the year Napster was launched), an estimated 1 million of the 10 million online music buyers were Napster users.
The behavior of music buyers changed as a result of this new technology.
Napster’s technology was originally developed for MP3 files but has already been extended to other applications.
Supporting Slide 6–M: Drill-Down – Napster as an Example of Technology and Market Coevolution
Napster may be gone — or is at least very different from its original form — but peer-to-peer file sharing is alive and well in services such as Audiogalaxy, KaZaA, LimeWire and Gnutella, which all offer a wide selection of digital recordings.
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Beta 1Initial input
Initial input
Evolution of customer preferencesEvolution of customer preferences
Product release
Product release
Evolution of technical possibilitiesEvolution of technical possibilities
Exhibit 6–10: Integrating New Technology with Customer Preferences
Beta 2 Beta 3
Source: Marco Iansiti and Alan McCormack, Sense and Respond (Harvard Business School Press, 1998).
The flexible development process emphasizes the integration of technology with customer preferences. Beta testing begins shortly after the product is developed and continues well into the implementation phase.
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Exhibit 6–11: The Development of Navigator 3.0
FebJan AprMar May Jun Jul Aug
Objectives
Input from user feedback
Beta 0 (internal)
Beta 1
Beta 2
Beta 3
Beta 4
Beta 5
Beta 6
Stabilize
Integration
Feature design and coding
Fullrelease
SpecificationscompleteStart
Source: Marco Iansiti and Alan McCormack, Sense and Respond (Harvard Business School Press, 1998
The Netscape 3.0 product innovation process is a good example of the flexible development process:
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Exhibit 6–12: Distributed Innovation
Customers Collaborators
EnablersSuppliers
Competitors Company
= Boundaries of the firm
= Feedback loop
The distributed-innovation model puts the purpose of continuously maintaining a fit between the organization and the evolution of the online domain at the very heart of the innovation process.
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Flexible Development Process Flexible Development Process Distributed Innovation ModelDistributed Innovation Model
Supporting Slide 6–N: The New-Economy Innovation Processes
Key points
– Concept development and implementation of the ideas in the field need to overlap and be tightly integrated
– Improved version of the traditional funnel process
Benefits– Time-to-market of innovations cut from
years to months
– Multiple versions of an innovation can be launched without significant risk or additional cost
– Increased flexibility to adjust direction of innovation
Key points
– Concept development and implementation of the ideas in the field need to overlap and be tightly integrated
– Improved version of the traditional funnel process
Benefits– Time-to-market of innovations cut from
years to months
– Multiple versions of an innovation can be launched without significant risk or additional cost
– Increased flexibility to adjust direction of innovation
Key points– An additional step away from classical
funnel process
– Taps into sources of online evolution: technology, collaborators, customer preferences, new entrants and competitors
– Innovation becomes a fluid process
Benefits– Maximizes use of both internal and
external experts and sources
– Minimizes the chance of the organization being surprised by external changes
– Highly interactive and more flexible than funnel process
– Reduced time-to-market
Key points– An additional step away from classical
funnel process
– Taps into sources of online evolution: technology, collaborators, customer preferences, new entrants and competitors
– Innovation becomes a fluid process
Benefits– Maximizes use of both internal and
external experts and sources
– Minimizes the chance of the organization being surprised by external changes
– Highly interactive and more flexible than funnel process
– Reduced time-to-market
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Chapter 6:Implementation
The general implementation framework
The importance of implementation
A framework for the delivery system and the five components of the delivery system
Online and offline integration
The categories of offline innovation and the offline innovation process
The new logic behind new-economy innovation and the new-economy innovation frameworks and processes
Case study: Schwab
Conclusion
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Case Study: SchwabDelivery System
PeoplePeople
SystemsSystems
AssetsAssets
• 395 branches (as of June 2002)• 8 million online and offline investor accounts (as of 8/31/2002)• Growing database of investor information
• Three-tier IT system included mainframes, middleware servers and Web servers
• The dial service eSchwab was separated from the traditional brokerage and reported directly to Schwab’s CEO• In 1998, after Schwab.com launch, Schwab and eSchwab were replaced with a new hybrid that gave Internet training to offline employees
An accounting of the first three components of Schwab’s delivery system — assets, people and systems — when Schwab migrated its products and services online by launching Schwab.com.
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Schwab’s InnovationSchwab’s Innovation
High investment in technology and strong history of releasing new products and services
Innovations offered convenience to customers while reducing Schwab’s overall service costs
With Schwab.com, investors can manage their portfolios and access new tools, such as an IRA analyzer, an online retirement planner and online funds transfer
High investment in technology and strong history of releasing new products and services
Innovations offered convenience to customers while reducing Schwab’s overall service costs
With Schwab.com, investors can manage their portfolios and access new tools, such as an IRA analyzer, an online retirement planner and online funds transfer
Case Study: Schwab Innovation
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Exhibit 6–13: Schwab IT Infrastructure
Source: Nicole Tempest and Warren McFarlan, Charles Schwab Corporation (A), Case no. 9-300-024, (Harvard Business School Publishing, September 1999).
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Exhibit 6–14: Timeline for Schwab Innovations
1979 1985 1989 1991 1992 1993 1995 1996 1997 1998 1999 2000
Entire trade clearing system brought in-house
Equalizer: DOS-based product enables PC users to trade stocks online
Telebroker: 24/7 quotes and order placement by telephone
SchwabLink: Service for fee-based financial advisors
OneSource: Mutual fund program allowing investors to purchase Schwab and non-Schwab funds free of charge
Streetsmart: Windows-based software allows online trading of equities, bonds and mutual funds
October 1995eSchwab:
Electronics software package dialing into Schwab system
June 1995Advisor
Source: Referral service for fee-based advisors
March 1996Upgraded
eSchwab: First major brokerage firm to offer trading via the Internet
September 1997Customized asset
allocation tool available online
October 7, 1997SchwabLink
available on the Web
October 1, 1997First speech-
recognition service for investors
January 27, 1998MoneyLink:
Electronic funds transfer service
May 14, 1998First US website
enabling order placement in Chinese
January15, 1998Schwab.com
launches
January 20, 1998IRA Analyzer
launches
September 21, 1998CD-ROM tool for
retirement setup and monitoring
November 23, 1998Web tool to track and
benchmark investor performance
April 16, 1999New site
based on user input
April 27, 1999Retirement
Planner onlineAugust 14, 1999Velocity
software trading system for active investors
September 8, 1999
New Web tools for investment advisor offering
May 24, 1999MySchwab
launches
August 19, 1999Plans for cross-
platform wireless trading
November 9, 1999Paperless trading
with eConfirms
October 20, 1999After Hours trading
November 23, 1999Velocity 2.0 launch
December 1, 1999Enhanced
Analyst Center
December 22, 1999New online mutual
fund tools
February 3, 2000Learning Center:
Interactive education tool for online learning
March 7, 2000Schwab and
Barclays announce Internet-based foreign exchange service
March 15, 2000Schwab expands
advice offering with portfolio consultation
March 31, 2000Schwab and Dow
Jones unveil online Chinese news and research service
May 7, 2000Stock Analyzer
launches, offering third-party equity analyst recommendations and earnings projections
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Case Study: Schwab Innovation Timeline Update
2001
Introduced Stock Explorer®, an online stock screening tool
Initiated Live Online program, a series of workshops that utilize the Internet to bring Schwab representatives and clients together to discuss investing strategies, retirement planning and wealth management
2002
Introduced an alternative for investment research: Schwab Equity Ratings™
Launched Schwab Advisor WebCenter™, an advisor-branded website development, and hosting service for independent investment advisors working with Schwab Institutional
2001
Introduced Stock Explorer®, an online stock screening tool
Initiated Live Online program, a series of workshops that utilize the Internet to bring Schwab representatives and clients together to discuss investing strategies, retirement planning and wealth management
2002
Introduced an alternative for investment research: Schwab Equity Ratings™
Launched Schwab Advisor WebCenter™, an advisor-branded website development, and hosting service for independent investment advisors working with Schwab Institutional
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Chapter 6:Implementation
The general implementation framework
The importance of implementation
A framework for the delivery system and the five components of the delivery system
Online and offline integration
The categories of offline innovation and the offline innovation process
The new logic behind new-economy innovation and the new-economy innovation frameworks and processes
Case study: Schwab
Conclusion
Last Updated: 03/18/02Copyright 2002 by Marketspace LLC
Implementation – Conclusion
What is online implementation?
Why does implementation matter?
What is the delivery system?
What are the five components of the delivery systems?
What are the advantages and disadvantages of online/offline integration?
What are the categories of offline innovation?
What is the offline innovation process?
What is the new logic behind the new-economy innovation?
What are the new-economy innovation frameworks?
What are the new-economy innovation processes?
After today’s lesson, you should be able to answer the following questions: